Bessette/Pitney’s AMERICAN GOVERNMENT AND POLITICS: DELIBERATION, DEMOCRACY AND CITIZENSHIP reviews the idea of "deliberative democracy." Building on the book, this blog offers insights, analysis, and facts about recent events.

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Sunday, September 3, 2017

Inequality: Rochester and Cupertino

Neil Irwin writes at NYT that companies such as Kodak once employed a large number of less-skilled workers and paid them well. Companies such as Apple employ fewer and pay them less well.

Apple, Alphabet (parent of Google) and Facebook generated $333 billion of revenue combined last year with 205,000 employees worldwide. In 1993, three of the most successful, technologically oriented companies based in the Northeast — Kodak, IBM and AT&T — needed more than three times as many employees, 675,000, to generate 27 percent less in inflation-adjusted revenue.

The high-tech companies pay less for less-skilled labor, in part by contracting out.

[A]cross a range of job functions, industries and countries, the shift to a contracting economy has put downward pressure on compensation. Pay for janitors fell by 4 to 7 percent, and for security guards by 8 to 24 percent, in American companies that outsourced, Arindrajit Dube of the University of Massachusetts-Amherst and Ethan Kaplan of Stockholm University found in a 2010 paper.

These pay cuts appear to be fueling overall inequality. J. Adam Cobb of the Wharton School at the University of Pennsylvania and Ken-Hou Lin at the University of Texas found that the drop in big companies’ practice of paying relatively high wages to their low- and mid-level workers could have accounted for 20 percent of the wage inequality increase from 1989 to 2014.

At one time, Kodak was the center of civic life in its headquarters city of Rochester, NY. Apple and Cupertino? Not so much:

“We definitely feel a sense of pride to be the home of Apple,” said Savita Vaidhyanathan, the mayor of Cupertino. “But they consider themselves a global company, not necessarily a Cupertino company.” She said she has never met Tim Cook, Apple’s chief executive. “We would have a hard time getting an audience with anybody beyond upper-middle management,” she said.